California’s Green Chemistry regulation of consumer products is one step closer to implementation with the release of a draft “Safer Consumer Product Alternatives” regulation by the California Department of Toxic Substances Control (DTSC) on June 23, 2010. Procedurally, the draft regulation continues to be an informal statement of regulatory intent. The actual regulation that will be proposed for adoption into law will likely be published in August. The draft regulation was the subject of two informal public workshops on July 7 and 8 in Sacramento, California. Written comments can be submitted on the draft regulation through July 15, 2010.

The current draft fills in some of the details that the prior “working papers,” “straw proposals,” and “draft outlines” left out. The basic intent, however, remains the same. The draft regulation would have DTSC identify Chemicals of Concern (COCs) and Priority Products (consumer products that contain COCs) based on health and environmental criteria and require manufacturers to perform Alternatives Assessments on the Priority Products. Based on the Alternatives Assessment, DTSC would prepare a regulatory response for specific Priority Products, which could range from no action to requiring ingredient disclosure, product labeling, end-of-life handling requirements, or an outright ban of the product.

If adopted and implemented in its current form, the draft regulation would fundamentally change how consumer products are developed and sold in California. It would impose “life cycle thinking” on all Priority Products sold in the State by requiring the manufacturer to prepare an Alternatives Assessment that is not unlike an Environmental Impact Report under the California Environmental Quality Act.1 The draft regulation would set forth in seven single-spaced pages the required elements of the Alternatives Assessment for all Priority Products. Producers, private label manufacturers, and importers of Priority Products in California would be jointly and severally liable for complying with the regulation.2 Failure to comply with the requirements of the Alternatives Assessment or with DTSC’s regulatory response requirements could result in a ban on the sale of the Priority Product following the placement of the Priority Product on DTSC’s Failure to Comply list.3

Under the draft regulation, the process would start with a request from DTSC to a manufacturer of a chemical or a consumer product for information about its consumer products.4 The required disclosure would include, among other information, the identity of all intentionally added ingredients in specified consumer products; the volume or units sold in California; the intended uses of the products; and analytical protocols for the detection of a chemical in products and the environment.5 DTSC would use that information, along with any other information it chooses, to prepare formal lists of Chemicals Under Consideration and of Chemicals of Concern.6 The lists would be based on several pages of factors in the draft regulation, including chemical properties, the dispersive volume of the chemical in commerce in California, potential routes of exposure and adverse impacts on the environment.7 The initial list of COCs would be chosen from chemicals that are (i) listed under California’s Proposition 65, (ii) identified in a European Union regulation as having mutagenic effects,8 or (iii) identified by the US EPA as chemicals that are persistent in the environment, bioaccumulate and are toxic.9 Subsequent lists of COCs developed by DTSC, however, would not be limited to such chemicals.

After listing the COCs, DTSC would then prepare a list of all consumer products that contain a COC (i.e., Priority Products).10 The draft regulation would identify seven statutory and three regulatory exemptions from listing a consumer product as a Priority Product. The statutory exemptions are, in general terms, for (1) a dangerous drug or device; (2) dental restorative materials; (3) a device; (4) packaging associated with (1) through (3) above; (5) food; (6) pesticides; and (7) mercury-containing lights.11The three regulatory exemptions would be for consumer products (i) that are already regulated by another government entity in a manner that addresses the life-cycle environmental and public health impacts of the product; (ii) for which there is no exposure pathway by which the COC might threaten the environment or public health; or (iii) for which the product contains only a de minimis concentration of the COC, to be determined by DTSC.12

Following the completion of the Alternatives Assessment for a Priority Product, DTSC would review the Assessment to determine the appropriate regulatory response.13 In determining its regulatory response, DTSC could request, and the manufacturer “shall provide” within the time period specified by DTSC, all additional information DTSC determines it needs to adopt a regulatory response.14 The range of regulatory responses in the draft regulation would be (i) no regulatory response required; (ii) the provision of product information to consumers; (iii) manufacturer end-of-life management requirements; (iv) product sales prohibition; and (v) other regulatory responses, which include, among others, restrictions on the use of a COC, requirements for Green Chemistry research and development, or “any other regulatory response DTSC determines is necessary.”15

A previous Beveridge & Diamond Client Alert on the April 15, 2010 DTSC draft outline of the regulation16 identified four provisions of the draft outline that merited particular attention. Those were procedural protections for regulated entities, the public petition process, the required certification of compliance, and the protection of confidential business information. The draft regulation fleshes out some of those procedural issues, but considerable uncertainty remains.

Under the draft outline, when a chemical or product would be listed as a COC or Priority Product, or when a manufacturer received a regulatory response with respect to one of its products, DTSC would simply post its action on its website. The draft outline did not provide any mechanism through which a regulated entity could administratively challenge DTSC’s determinations. The draft regulation, however, would provide for two dispute resolution procedures, a formal procedure applicable to regulatory response challenges and an informal procedure applicable to all other DTSC actions, including chemical and product listing decisions.17

The two administrative appeal procedures would establish lengthy, mandatory administrative appeal processes. The formal procedure could, by its own terms, take more than one year to generate a decision in favor of a manufacturer, and even then the formal procedure would state that “if the final (administrative) order grants the relief sought by the manufacturer, ... the order shall remove the ... determination back to the responsible program for re-evaluation” with guidance for the re-evaluation.18 The informal administrative appeal procedure would have over 120 days built into the process.19 Both procedures, therefore, would introduce potentially significant delays to an affected party seeking judicial relief from DTSC actions because of the need to exhaust administrative remedies before undertaking judicial review.20 In that regard, the formal procedure provisions would state that a final administrative decision is a prerequisite to seeking judicial review of DTSC’s decision.21 The draft regulation would further declare that a failure to follow fully either procedure constitutes a waiver of the right to “contest the disputed issue administratively.”22

The draft regulation would also establish the standards of review. Facts, assumptions, and legal conclusions would be challenged under a “clearly erroneous” standard, and discretionary or policy decisions would be reviewed under an “abuse of discretion” standard.23

With regard to the public petition process, the draft outline would have introduced a mechanism through which any member of the public could petition DTSC to consider chemicals or consumer products in the listing process. As identified in the previous Client Alert, the draft outline did not contain a process through which regulated entities could submit their own data to challenge public petitions, or a process through which regulated entities could petition to have chemicals or products removed from the lists. The draft regulation still does not address this concern, although the concerns raised by the lack of such a process are partially addressed by the administrative appeal process discussed above.

The draft outline included provisions that would require importers and retailers to obtain a Certificate of Compliance from product manufacturers. It also included provisions that would specify penalties for non-compliance with various provisions of the regulation. The draft regulation would do away with the Certificate of Compliance requirement, and instead would hold producers, private label manufacturers, and importers jointly and severally liable for violations.24 Further, the draft regulation would stipulate that failure to comply with the requirements would be subject to enforcement actions, fines, and penalties under Article 8 of Chapter 6.5 of Division 20 of the Health and Safety Code.25 Presumably, this provision would apply to information requests and Alternatives Assessment as well as more concrete DTSC dictates of its regulatory responses. The draft regulation would also provide for product bans as an enforcement remedy available to DTSC for a failure to comply with a requirement specifically associated with a Priority Product.26

The final concern raised in the previous Client Alert was DTSC’s cursory treatment of the protection of confidential information. The draft regulation would provide more detail as to the substance and procedure for protecting trade secret and confidential business information, but its provisions would be difficult to apply. This difficultly is captured by the following sentence from the six single-spaced pages addressing confidentiality regulation: “Any information provided to DTSC pursuant to . . . this chapter will be made available to the public to the extent and in the manner authorized by H&SC section 25257, any other applicable California statute, this chapter, and the California Public Records Act as applicable.”27 The draft regulation would “clarify” that sentence by stating that “the provisions of the California Public Records Act shall apply . . . only to the extent that they do not conflict with H&SC section 25257 and any other applicable California statute.”28 Suffice it to say that any attempt to invoke the trade secret and confidentiality protections of the draft regulation would involve significant legal analysis to understand fully the process and the protections. This is unfortunate because the enabling legislation for the draft regulation contains a relatively straight-forward statement of the confidentiality protections for information disclosed to DTSC that is similar to protections under other California statutes.29

In conclusion, DTSC appears to be on schedule to adopt its Green Chemistry consumer product regulation in advance of the January 1, 2011 statutory deadline. This means that over the next few months the draft regulation can be anticipated to progress to a formal proposal for rulemaking by DTSC. Clearly, a lot of work remains to be done on the Green Chemistry regulation. However, the remaining opportunities for public comment are narrowing. Although the upcoming November 7, 2010 election of a new Governor for California may affect the aggressiveness of DTSC’s implementation of the Green Chemistry regulation, there appears to be clear momentum for its adoption in advance of the swearing-in of the new Governor in January 2011. Accordingly, all interested parties may want to review the draft regulation and consider submitting comments on any desired changes.

For additional information on California’s Green Chemistry Initiative, please contact Kenneth Finney at kfinney@bdlaw.com, Laura Duncan at lduncan@bdlaw.com, or Ryan Tacorda at rtacorda@bdlaw.com. This article was prepared with the assistance of Zachary Norris.